The Option and Decision to Repurchase Stock
Financial Management (Forthcoming)
40 Pages Posted: 31 Jul 2011 Last revised: 9 Apr 2014
Date Written: April 8, 2014
Open market repurchase programs provide firms with the flexibility to manage the cash and risk aspects of their operations. This paper therefore aims to determine whether cash and risk matter only at the implementation stage in the sequence of a repurchase program: announcement, implementation, and withdrawal. We do find that temporary cash and risk measures only affect the implementation decision, while partially negating the traditional signaling effect around program announcement. The relevance of the flexibility afforded by the early announcement of a repurchase program is also evidenced by a steadily increasing time-to-event probability of repurchase implementation and program withdrawal.
Keywords: Share repurchase, open-market, flexibility, cash, risk
JEL Classification: G35
Suggested Citation: Suggested Citation